Managing Finances For A Small Business -A Helpful Guide

T he amount of businesses that open per year is estimated to be around 630,000 and about half of them tend to fail in the fifth year. More than not, the reasons for its failure isn’t a lack of customers or clients but is usually more about poor finance management which causes them to lose all their money without making any in return. This is why It is vital to learn about managing finances for a small business before you get started. 

The thing with running a business is that you usually don’t get a chance to recover from your mistakes because every small mistake adds up in the end. Keeping track of where your money goes and planning to the penny is crucial for a smooth-running business. Don’t be intimidated, managing finances for a new small business isn't hard but it's something that you need to learn before you start for your business to flourish. This guide will tell you all the main points you need to know about starting a business so you can have a flawless start. 

Set Goals

You need to plan ahead in order to succeed. As they say, if you haven't planned 10 years ahead then you are behind. It is important to plan out details such as wanting to open a second outlet by the end of the year or wanting to reach a certain amount of sales by the end of the month. This will help you focus on all the things you want to do and will make it easier for you to be able to plan your financial decisions around them with a clear mind and a clear end-goal. 

Plan a Schedule

Knowing how much money you need and what goals you have for your business is important as you'll be more aware of where your money needs to go. Make a list of all the necessary payments you'll need to make on a monthly basis and make a schedule. This way it’ll be easier to remember and keep track of all the payments that need to be done and you’ll be aware of how much money is going out. You’ll be able to deduce how much you can afford to invest in other things and will be able to set your priorities. For example, employee wages are more important to pay rather than buying a new photocopier for the office. 

Track Your Cash Flow 

It's important to keep track of where your money goes. With the schedule in place, it’ll be easier to see what is coming in and what is going out as well as spot anything unnecessary or suspicious, such as embezzlement, which can then be spotted very soon. 

It's also good to know of bookkeeping techniques. Even if you are working with a bookkeeper, you should always make it a habit to monitor your books, so you can personally know what is happening and how to manage things if something goes wrong. Tracking your cash flow is critical for a smooth-running business. 50% of businesses fail every five years and the majority is because of bad money management. Even when your business goes big, you need to stay diligent because over time pending invoices or late payments can very easily grow and throw you under.

Business Credit 

It's important to have a good business credit. Of course, you should be mindful of your credit score either way but don’t think of it as an unimportant task and put it at the bottom of your list. With a growing business you’ll find a need to purchase real estate or insurance, and these things may become very hard for you to get due to neglecting your credit score. If you ever need to take out a loan, make sure the interest rate is something you can easily afford and pay off. 

Speaking of loans, most new business owners feel intimidated getting loans in fear that they'll be in debt. However, as long as it is manageable and affordable, a loan can definitely be a needed help. 

In short, you need to be well versed in managing finances for a small business. There's usually no room for mistakes since they all catch up with you, however, don't let this discourage you. It may ask for perfection but it's not as hard as it may seem.

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• finances
• business
• loans
• small businesses
• Cash flow
• Managing Finances